100% renewable energy can deliver lower-cost, reliable power to small islands across Philippines: new report

Posted on May 8th, 2017

MANILA, 8 May 2017—Replacing diesel generation with renewables in small islands can save the Philippines over 10 billion pesos (US $200 million) per year, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) and the Institute for Climate and Sustainable Cities (ICSC).

The report finds also that investment opportunities in small island renewables are worth at least $1 billion to private developers in the country.

“Currently, Philippine taxpayers are footing a huge bill by subsidizing expensive imported diesel to provide dirty and unreliable power for the small islands,” said the lead author of the report, IEEFA analyst Sara Jane Ahmed. “Today there is a need to modernize this outdated system and supply affordable, reliable, more efficient, more secure, and cleaner power.”

Small islands in the Philippines are served by mini-grids powered by generators fueled by imported diesel and bunker (freighter) oil. As a result of grid instability, inadequate generation capacity and lack of subsidized fuel, these islands suffer from blackouts and unplanned power outages.

Power for the islands costs over 60 billion pesos in subsidies, the report states, despite only accounting for 6% of total energy demand and 0.49% of total generation.

Many islands do not even have 24/7 electricity service, even with expensive subsidies. Only 22 of 233 areas in question have 24/7 electricity, with over 70% having less than eight hours per day of electricity. As of 2014, over four million households remain without electricity.

With solar-powered electricity costs falling by 99% since 1976 and 90% since 2009, and with the cost of wind-powered generation declining by 50% since 2009, the economics of renewable energy make it particularly suitable for small islands, which are unable to link to mainland electricity grids.

“Unfortunately, barriers to the modernization of small island electricity systems still exist,” said Jose Logarta, ICSC senior energy advisor. “Chief among them are outdated regulations, and the Philippines presents a prime example of how techno-economic change has outpaced government regulation.”

“Islands such as Sumba in Indonesia have already cut energy costs by 35% by following the global trend towards renewables,” Logarta said. “This examples indicates a major opportunity for islands all across the Philippines.”

The current system in the Philippines creates no incentives for electric cooperatives to procure cheaper sources and reduce costs, the report notes. Prudent reforms would require electric cooperatives and private distribution utilities alike to optimize procurement, helping level the playing field for renewable power generators and reducing taxpayer costs by phasing out subsidies for imported diesel fuel.

“The Department of Energy should direct the National Power Corporation’s Small Power Utilities Group to speed up the hybridization of its plants and install as much renewable energy-powered plants in new sites identified for electrification,” Ahmed said. “Moreover, the National Electrification Administration should direct electric cooperatives to be technology-neutral in the procurement of power.”

“Small islands in the Philippines are placed perfectly to benefit from dramatically reduced costs of renewable energy. Simple reforms can pave the way for cleaner, cheaper and more reliable energy for more than 800,000 of the poorest Filipinos,” Ahmed added.

Access to cheap, secure, and reliable energy is a key factor in poverty alleviation and enterprise development. Developing small island grids is a key strategy to advance inclusive and modern development.